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Archive for September, 2017
 
Economic Advisor: September 27, 2017
September 27, 2017


 

Existing home sales continued their slump, while housing starts were down and layoffs fell.

Existing Home Sales

Sales of existing single-family homes, townhomes, condominiums and co-ops fell 1.7 percent in August to an annual rate of 5.35 million, down from 5.44 million in July, according to last week’s report from the National Association of Realtors. This is the fourth monthly drop in five months, and NAR Chief Economist Lawrence Yun chalked the slump up to poor supply, which is pushing up prices. While the demand is there, the prices are pushing homes out of reach for enough buyers that it is cutting sales volume.

“Steady employment gains, slowly rising incomes and lower mortgage rates generated sustained buyer interest all summer long, but unfortunately, not more home sales,” Yun explained. “What’s ailing the housing market and continues to weigh on overall sales is the inadequate levels of available inventory and the upward pressure it’s putting on prices in several parts of the country. Sales have been unable to break out because there are simply not enough homes for sale.”

And that inventory continued to drop. August’s number of new homes for sale dropped 2.1 percent, falling to 1.88 million units, which constituted a 4.2-month supply at August’s sales rate. Looking at prices, August’s median price for existing homes of all types hit $253,500, which marked a 5.6 percent gain over August 2016’s price of $240,000. This was the 66th consecutive month of year-over-year price increases.

“Market conditions continue to be stressful and challenging for both prospective first-time buyers and homeowners looking to trade up,” Yun noted. “The ongoing rise in home prices is straining the budgets of some of these would-be buyers, and what is available for sale is moving off the market quickly because supply remains minimal in the lower- and mid-price ranges.”

Housing Starts

Turning to construction to gauge the possibility of increased housing inventory, we can see that there’s work to be done. Starts on construction of private housing dipped 0.8 percent in August to fall to an annual rate of 1.18 million, the Census Bureau reported last week. That said, when compared to a year ago, starts were up 1.4 percent over August 2016’s rate of 1.164 million.

Building permits issued for the construction of private housing during August hit an annual rate of 1.3 million, which was 5.7 percent higher than July’s rate of 1.23 million. Moreover, when compared against last year, this was 8.3 percent higher than August 2016’s pace of 1.2 million.

Looking specifically at single-family homes, starts on construction of homes grew 1.6 percent in August to hit 851,000, up from July’s starts of 838,000. Authorizations for construction of single-family homes retreated in August to a rate of 800,000, which was 1.5 percent below July’s permits of 812,000.

Initial Jobless Claims

Once again, hurricanes Harvey and Irma impacted the most recent lay-offs report from the Employment and Training Administration. First-time claims for unemployment benefits filed by the newly unemployed during the week ending September 16 dropped to 259,000, a considerable drop of 23,000 claims from the preceding week’s total of 282,000, the Administration reported last week.

The four-week moving average — regarded as a more reliable measure of initial jobless claims — was thrown as well, notching up to 268,750 claims, a gain of 6,000 claims from the prior week’s average of 262,750. Despite the storm, this marked the 133rd week in which initial claims were below the 300,000-claim level, which economists consider an indicator of a growing job market.

This week, we can expect:

  • Tuesday – New home sales for August from the Census Bureau.
  • Wednesday – Durable goods orders for August from the Census Bureau.
  • Thursday – Initial jobless claims for last week from the Employment and Training Administration; second quarter GDP from the Bureau of Economic Analysis.
  • Friday – Personal incomes and spending for August from the Bureau of Economic Analysis; consumer sentiment for September from the University of Michigan Surveys of Consumers.

Posted in Economic Advisor



Economic Advisor: September 21, 2017
September 21, 2017


 

Retail sales took a large, hurricane-related hit, while consumer prices expanded, and jobless claims data also continued to be skewed by weather.

Retail Sales

Hurricane Harvey is already having its impact on the economy, as retail sales for August dropped 0.2 percent to $474.8 billion, the Census Bureau reported last week. This was the biggest decline in six months, and many experts attributed the drop to Harvey.

“The early returns from Harvey are trickling in and the news is not good,” Naroff Economic Advisors’ Chief Economist Joel Naroff told the Reuters news service. “Economists are likely marking down third-quarter growth and marking up the fourth quarter.”

The Bureau said that it could not isolate Harvey’s specific impact on retail sales, but it was told from reporting companies that the disaster had “both positive and negative effects on their sales data while others indicated they were not impacted at all,” according to Reuters.

Sectors that saw big swings included gas stations, which increased by 2.5 percent; motor vehicle and parts dealers, which dropped by 1.6 percent; clothing stores, which fell 1 percent; non-store retailers (such as online stores and kiosks), which fell 1.1 percent; and miscellaneous retailers, which grew 1.4 percent.

Consumer Prices

In related news, the Consumer Price Index for All Urban Consumers (CPI-U) grew 0.4 percent in August, according to last week’s report from the Bureau of Labor Statistics. Since August 2016, the index has risen 1.9 percent.

Gas and shelter prices accounted for most of the growth. The energy index grew 2.8 percent during August, with the gasoline index shooting up 6.3 percent. The shelter index increased 0.5 percent for the month, with the rent index growing 0.4 percent. The food index only showed a slight uptick.

The index for all items less food and energy — referred to as “core inflation,” because it removes the most volatile categories — increased 0.2 percent during August.

Initial Jobless Claims

The impacts of Hurricanes Harvey and Irma were felt on the jobless claims front, as well. First-time claims for unemployment benefits filed by the newly unemployed during the week ending September 9, dropped to 284,000, a loss of 14,000 claims from the prior week’s total of 298,000, according to last week’s report from the Employment and Training Administration.

This large swing comes after the previous week’s claims were skewed widely upward by Hurricane Harvey. In terms of the latest report, the Administration stated without equivocation that both Harvey and Irma had impacted the numbers.

Case in point: the four-week moving average — considered a more stable measure of jobless claims — ballooned to 263,250, an increase of 13,000 claims from the preceding week’s average of 250,250 claims.

In any case, this marked the 132nd straight week that initial claims have come in below the 300,000-claim level, which economists consider an indicator of a growing job market.

This week, we can expect:

  • Tuesday — Housing starts and building permits for August, as well as import prices for August, from the Census Bureau.
  • Wednesday — Existing home sales for August from the National Association of Realtors.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; leading economic indicators for August from The Conference Board.

Posted in Economic Advisor



Economic Advisor: September 13, 2017
September 13, 2017


 

A major hack threw the world of credit rating into disarray, while consumer credit grew, and historic weather threw off weekly layoff numbers.

Equifax

The biggest economic and financial headline to hit last week was the revelation that hackers had compromised the records of credit reporting bureau Equifax, gaining access to data on at least 143 million Americans. Hackers could have gotten access to sensitive information such as driver’s licenses and Social Security numbers.

“This is about as bad as it gets,” said Pamela Dixon, executive director of the nonprofit World Privacy Forum, in a public statement. “If you have a credit report, chances are you may be in this breach. The chances are much better than 50 percent.”

To make matters worse, Equifax’s handling of the situation raised serious concerns among consumers and credit industry experts. For example, the agency offered to provide a free credit monitoring service, but consumers and journalists quickly noticed that the offer’s fine print blocked participants from taking any individual or class legal action against Equifax. Also, while Equifax discovered the breach on July 29, it didn’t announce it until September 7. Moreover, three senior executives from Equifax unloaded $1.8 million in shares shortly after the July 29 discovery.

The net effect is that consumers are contacting Equifax, Experian and TransUnion in droves to freeze their credit, but no one is quite sure — at least for the moment — what will be the fate of Equifax.

“You cannot fire the three credit bureaus,” Rohit Chopra, a previous assistant director at the Consumer Financial Protection Bureau who is now a senior fellow at the Consumer Federation of America, told the New York Times. “Credit reporting agencies are the plumbing of our financial system but are much less regulated than many banks.”

Consumer Credit

In related news, consumer credit grew 5.9 percent in July to hit a total of $3.75 trillion, according to last week’s report from the Federal Reserve. The big gains were in non-revolving debt, such as car and student loans, which increased 6.9 percent to hit $2.75 trillion. Revolving debt, such as credit cards, grew 3.2 percent to hit $994.5 billion.

Consumer credit is an important indicator to monitor because it shows consumer willingness to use credit to get what they need. Given that consumer spending drives roughly 70 percent of the economy, that increased confidence in using credit points to more economic growth.

Initial Jobless Claims

Hurricane Harvey wildly skewed the most recent lay-offs report. First-time claims for unemployment benefits filed by the newly unemployed during the week ending September 2 shot up to 298,000, a massive increase of 62,000 claims from the preceding week’s total of 236,000, according to numbers released last week by the Employment and Training Administration. This would put the report at a more than two-year high, but again, these numbers were skewed according to the Administration.

The four-week moving average — regarded as a more reliable measure of initial jobless claims — was thrown as well, hitting 250,250 claims, a surge of 13,500 claims from the prior week’s average of 236,750. Despite the storm, this marked the 131st week in which initial claims were below the 300,000-claim level, which economists consider is an indicator of a growing job market.

This week, we can expect:

  • Wednesday — Producer Price Index for August from the Bureau of Labor Statistics.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; Consumer Price Index for August from the Bureau of Labor Statistics.
  • Friday — Retail sales for August and business inventories for July from the Census Bureau; industrial production and capacity utilization for July from the Federal Reserve; consumer sentiment for September from the University of Michigan Surveys of Consumers.

Posted in Economic Advisor



Economic Advisor: September 6, 2017
September 6, 2017


 

Construction spending suffered an unforeseen tumble, while employment saw little change and second quarter GDP enjoyed solid growth.

Construction Spending

Construction spending unexpectedly fell for the second consecutive month in July to hit a nine-month low point, according to data released last week by the Census Bureau. For a housing market keen to see inventory growth in order to control ever-growing home prices, a drop in spending wasn’t welcome news, but the Bureau’s report contained a glimmer of good news when it came to real estate.

The market had expected a 0.6 percent increase in spending for the month, but construction spending actually fell 0.6 percent to an annual rate of $1.211 trillion for the month, the Bureau reported. That said, when compared to last year, July’s spending was 1.8 percent higher than July 2016’s rate of $1.189 trillion.

Spending on private construction dropped 0.4 percent to an annual rate of $945.5 billion. That said, residential construction during July was the bright point of the month, growing 0.8 percent to hit an annual rate of $517.5 billion. That growth was led by construction spending for single-family homes, which grew 0.8 percent to an annual rate of $264.1 billion. Meanwhile, spending on multi-family units fell 0.8 percent to an annual rate of $60.9 billion.

Employment

Turning to the job market, employment didn’t see much growth, with the economy adding just 156,000 jobs, keeping the unemployment rate at 4.4 percent, according to last week’s report from the Bureau of Labor Statistics. This was below market expectations of 170,000. The sectors of the economy that helped drive that job growth were manufacturing, construction, professional and technical services, healthcare, and mining.

The number of unemployed Americans totaled 7.1 million, which was little changed from the previous month. Many experts chalked up August’s slowing job performance to a regularly appearing slowdown at that time of the year.

“The August payroll count does tend to be biased downward, typically reflecting seasonal difficulty in measuring the timing of back-to-school, as well as low initial response rates during the summer” Morgan Stanley Economist Robert Rosener told the New York Times.

The number of people without jobs for 27 weeks or longer — a.k.a., the long-term unemployed – was little changed for the month at 1.7 million, and accounted for 24.7 percent of the unemployed population. The number of people involuntarily employed on a part-time basis for reasons such as their hours being cut back or that being the only work they could find totaled 5.3 million, which was little changed from the previous month.

Gross Domestic Product

Real gross domestic product (GDP; the output of the U.S. economy) grew at an annual rate of 3 percent during the second quarter of 2017, according to the latest estimate released last week by the Bureau of Economic Analysis.

The news was welcome in that it beat market expectations of 2.8 percent growth, and because it was a sizable increase in the pace of growth from the first quarter’s 1.2 percent gain. Moreover, it was the biggest quarterly GDP growth gain in more than two years.

So what drove the gains? The bureau chalked up the second quarter gains to a variety of factors: increases in consumer spending, nonresidential fixed investments, exports, and federal government spending.

This week, we can expect:

 

  • Tuesday — Factory orders for July from the Census Bureau.
  • Wednesday — Trade Balance for July from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; second quarter productivity from the Bureau of Labor Statistics.
  • Friday — Wholesale inventories for July from the Census Bureau; consumer credit for July from the Federal Reserve.

Posted in Economic Advisor



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